Regional Economic Outlook. Summer’25

10 July 2025. — In early 2025, the region’s economies showed varying growth rates, shaped by both domestic factors and external conditions. The Kyrgyz Republic and Tajikistan recorded the strongest performance in Q1 2025, with GDP growth of 13.1% and 8.2% YoY, respectively. This growth was driven by the construction sector, strong domestic demand and remittances from migrant workers. Meanwhile, Russia’s economy entered a cooling phase, with GDP growth slowing to 1.4% YoY and a decline in industrial output. Kazakhstan’s economy remained relatively resilient, with GDP growing by 5.6% YoY, although quarterly figures point to a deceleration following strong growth in Q4 2024.

Inflationary trends across the region are uneven. In Russia, inflation began to ease, reaching 10.3% YoY in Q1, while in other countries, including Kazakhstan (11.3%) and Belarus (5.9%), price pressures continued to rise. Relatively tight monetary policy is expected to remain in place throughout the region over the medium term.

The fiscal situation remains broadly stable. Armenia, Kazakhstan, the Kyrgyz Republic and Tajikistan posted budget surpluses. However, some countries still face risks to revenue, linked to one-off factors and the potential increase in expenditure on large-scale infrastructure projects.

Foreign trade trends are mixed. The trade balance deteriorated in Russia and Armenia, while it improved in the Kyrgyz Republic and Tajikistan due to reduced imports and higher remittances. The Russian rouble has temporarily appreciated, supported by a high key rate, but is expected to weaken by 2027. A similar trajectory is projected for the tenge.

Between 2026 and 2027, Russia’s economy is expected to cool further, with growth slowing to around 2%. Belarus is also projected to see a significant slowdown, with growth falling to around 1%. However, Central Asian economies are expected to sustain higher growth rates of 5–7%. Inflation will gradually ease but is likely to remain above target levels in most countries. Key risks include reliance on commodity markets, weakening investment activity, inflationary pressures stemming from rising wages and tariffs, and the risk of economic overheating driven by lending and fiscal stimulus.

Nonetheless, even if these risks materialise, we do not expect critical imbalances to emerge that would threaten macroeconomic or financial stability in the region’s countries.